Japan's authoritative Tankan survey shows that overall business confidence remains positive, if not as high as expected, while Japanese investment in China reached a record high in 2005.
According to Japan's central bank, overall confidence among Japanese manufacturers is high. However, the banks' latest quarterly survey of business sentiment, known as the "Tankan," showed that confidence slipped slightly for the three months through March because of high oil prices. The survey index was at 20, down one point since December. Many investors and economists had expected a two-point rise.
Officials at companies in fabric, pulp and paper production said they could not offset the increased cost of oil. On the other hand, manufacturers of cars and electrical machinery said they are doing well.
The survey of 8,300 companies was positive overall, with companies in every industry saying they planned to increase their investment spending by an average of two-point-seven percent in 2006. The Tankan showed industrial production growing faster than many people had expected, with major manufacturers' output improving significantly during the three-month period.
In another sign of Japan's improving economy, unemployment is down to its lowest rate in nearly five years - 4.1 percent in February, compared with 4.5 in January. For all of 2005, unemployment averaged 4.4 percent.
Hiromichi Shirakawa, chief economist for Credit Suisse Securities Japan, explained what the figures mean for Japan's economy.
"Well, as expected, the Tankan report indicted that Japanese business sentiment remained healthy, backed by [the] continuous expansion of sales and profits," he said. "More importantly … a larger number of companies are now facing a shortage of labor. We believe this is a continuing trend, and the survey suggests that wages would increase from here on."
And Japan's investment in China reached a record high of $6.5 billion in 2005, a 19.8 percent increase over a year earlier.
According to the Japan External Trade Organization's Beijing Office, Japanese companies that worried about anti-Japanese demonstrations in China in early 2005 regained confidence in the latter half of the year.
Japanese automakers contributed greatly to the increased investment as they built new manufacturing facilities in China.